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Tax Saving Options for NRI’s

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When it comes to NRIs they do not have as much tax saving options open to them as the Resident Indians do. Here we show you the list of tax saving options available for NRIs and how NRIs can make maximum profit from them:

1. Section 80C – From the various tax saving avenues available to Indian tax savers –

(i) ELSS (Tax saving Equity Mutual Fund schemes) – ELSS are equity-oriented mutual fund schemes that invest in a diversified portfolio of Indian stocks. ELSS schemes can be purchased online and come with a lock-in period of 3 years. They are ideal for long-term tax-free savings.

(ii) House property – Buying a house property in India is a good investment if you plan to come back in the future. The principal and interest payments made every year for a home loan availed in India are allowed as deductions subject to an overall limit of Rs 1 lakh per year on principal payments (under section 80C) and full interest payments made during the year (under section 24b) – in case of let-out property.

(iii) Life Insurance and Pension Plans – There are many life insurance and retirement/pension plans of Insurers that can be bought by an NRI. You can buy retirement plan with or without life cover and also choose between a traditional plan (endowment, money-back) and a unit-linked plan depending upon your risk appetite. Point to note is that the policies are issued in Indian Rupees only. There is also a facility available with few insurers like LIC for NRIs to obtain insurance cover from their present country of residence where all formalities are completed in their present country of residence, subject to fulfilment of certain rules and restrictions on sum insured amounts and add-on riders.

2. Section 80D – [Health insurance premium payment] -

NRIs can purchase health insurance policy in India for themselves, their family and also dependant parents and claim deduction for the premium paid up to Rs 35,000 per annum [Rs 15,000 in case of non-senior citizens and Rs 20,000 for senior citizens];

3. Other Deductions u/s 80 –

(i) Deduction under 80G – for specified donations;

(ii) Deduction under 80E – for interest payment towards Educational loan taken from any bank/approved financial institution for higher studies (comprising full time as well as vocational studies pursued after passing senior secondary examinations studies) for self or any of immediate family members (children, spouse).

Investments not available for NRIs – PPF (Public Provident Fund), NSC (National Savings Certificate), SCSS (Senior citizens savings account), tax saving infrastructure bonds under section 80CCF and POTD (Post office time deposits) are not available for NRIs. However, if you had already opened any of these accounts when you were a Resident Indian, you can continue to service the account(s) till maturity.

The overall limit on section 80C, 80CCC is Rs 1 lakh per annum.

Written by Priya Rao

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  • smandan

    Good suggestions for NRI

    • Yogi Cfp

      Thank you. Keep coming back to us for more informative articles.

  • k.r.narayanan

    My brother is an NRI.. We have an old house which we are demolishing & redeveloping among the siblings..Since he has opted out of the new flats, the Builder is giving him 35.0Lakhs.The Builder says since he is an NRI,he will deduct TDS @20%+cess & give balance to him.To reduce tax ,if he puts the 35.0L in infra /REC tax free Bonds, could hevavoid the tax deduction at source?

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